The nickel element doped holmium oxide (Ho2O3:Ni) transparent magneto‐optical ceramics were fabricated by vacuum sintering and the dopant impacts on structure features and Faraday effects were investigated. The starting oxide powders were synthesized by pyrolyzing the resulting layered holmium‐based hydroxide nanosheets prepared from a chemical precipitation route using the sodium hydroxide as precipitant at the freezing temperature. Upon high‐temperature sintering, the defect is introduced by Ni2+ substitution for Ho3+ to form the interstitial solid solution. The 1 at.% Ni2+ doped Ho2O3 ceramic sample exhibits an in‐line transmittance of ∼70.04% at 1 550 nm with a relative density of ∼99.88%, while more Ni2+ incorporation (e.g., 2‒5 at.%) even leads to a completely opaque state. The magneto‐optical transparent Ho2O3:1%Ni ceramic developed in this work has Verdet constants of ∼−195, −65, and −29 rad/(T·m) at 635, 1 064, and 1 550 nm, respectively, which are ∼1.8‐fold higher than the commercial terbium gallium garnet crystal or ∼1.4‐fold higher than the pure Ho2O3 ceramic. This material also possesses relatively large figure of merit of ∼14.6°/T at 1 064 nm and relatively high thermal conductivity of ∼7.5 W/(m·K) at room temperature.